Introducing property tax in China as an alternative financing source

Since the beginning of the 21st century, China has been involved in active discussion on the introduction of the property tax. Yet the current land management system is unsustainable mainly because land supply is limited. This is because the system of lump sum grants produces distorted interests among suppliers and consumers of land. The property tax can be both a cure for these problems and create an alternative financial source of revenue for local governments. We suggest a theoretical model that proves the superiority of a property tax over lump sum grants. (C) 2014 Elsevier Ltd. All rights reserved.